EU Charges Google Over Shopping Searches, to Probe Android

The European Union accused Google Inc on Wednesday of cheating competitors by distorting Internet search results in favour of its Google Shopping service and also launched an antitrust probe into its Android mobile operating system.

In a statement, Competition Commissioner Margrethe Vestager said the U.S. tech giant, which dominates Internet search engines globally, had been sent a Statement of Objections effectively a charge sheet to which it can respond.

"I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules," she said. "If the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe."

The Commission, whose control of antitrust matters across the wealthy 28-nation bloc gives it a major say in the fate of global corporations, can fine firms up to 10 percent of their annual sales or a penalty of over $6 billion (roughly Rs. 37,415 crores) for Google.

If it finds that companies are abusing a dominant market position, the EU regulator can also demand sweeping changes to their business practices, as it did with U.S. software giant Microsoft in 2004 and chip-maker Intel in 2009.

There was no immediate public response from Google, but an internal memo to staff published by the blog re/code described the moves as "very disappointing news" and said: "We have a very strong case, with especially good arguments when it comes to better services for users and increased competition."

Of the formal investigation into Android, used on smart phones and tablets, Vestager said: "I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company."

She announced the moves on the eve of a high-profile visit to the United States, following five years of investigation and abortive efforts to strike a deal with Google by her Spanish predecessor, Joaquin Almunia, who handed over the politically charged dossier to the Danish liberal in November.

However, the focus on the ranking of searches for shopping sites Google has its own service called Google Shopping did not address all the complaints lodged with the Commission by competitors, large and small, in Europe and the United States, who say Google has hurt their business.

Google initially has 10 weeks to respond to the charges and can demand a hearing. A final resolution quite possibly involving court action if Google does not choose to settle is likely to take many months and probably years.

Critics welcome
Google's critics welcomed the decision to pursue the U.S. giant, though many industry experts believe the action is unlikely to markedly shift existing business their way. Rather, by firing a hefty shot across Google's bows, it may favour competitors in new areas as technology develops.

That has been a priority for the new European Commission led by Jean-Claude Juncker, which wants to promote a more dynamic digital market in Europe and foster home-grown enterprises.

Juncker is also pressing for a free-trade treaty with Washington to bolster growth and Vestager has stressed she is not seeking to penalise American firms or large companies merely to avoid abuses of dominant market positions.

President Barack Obama accused the EU in February of taking a protectionist stance against the U.S. tech industry.

American domination of the Internet and other new technology sectors has prompted a mixture of admiration and anxiety in Europe in an echo of similar mixed feelings about reliance on U.S. military might for security against a resurgent Moscow.

Germany, backed by major companies in the EU's biggest economy, has been particularly vocal in pressing the Commission to act against Google, although major U.S. rivals including Microsoft and Expedia also lodged complaints.

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Axel Springer chief Mathias Doepfner told the German media group's shareholders in Berlin on Tuesday that Almunia's efforts to negotiate a deal with Google would have been a "shoddy compromise" and praised Vestager for being "more determined, quicker and more true to the facts".

Almunia, who launched the initial probe in 2010, last year yielded to pressure from Germany and others to abandon a deal he had been favouring.

Google has put forward three proposals to resolve the case. Most recently, just over a year ago, it offered to give competing products and services bigger visibility on its website, let content providers decide what material it can use for its own services and make it easier for advertisers to move their campaigns to rivals.

Almunia initially accepted that deal, only to reverse his decision six months later and demand more concessions, leaving the ultimate decision to his successor.

Microsoft has been hit with total EU fines of more than 2.2 billion euros ($2.34 billion) over the past decade.

© Thomson Reuters 2015